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					         Substantive Due Process & Punitive Damages

 BMW v. Gore’s three guideposts for determining whether
 punitive damages are excessive under the 14th amendment:

    Reprehensibility of D

    Ratio of punitives to potential/actual harm caused by D

    Other civil/criminal penalties for D’s conduct
      State Farm – refining BMW guideposts

 State Farm majority held that the 1st Gore guidepost (D ’ s
  reprehensibility) was the most important indicium of whether
  punitive damages are reasonable.
         Indicia of reprehensibility: physical vs. econ harm; D indifferent to
          health/safety of others; are D’s actions repeated; do D’s actions hurt
          financially vulnerable; is there intentional malice, trickery or deceit

         Opinion on R was that SF ’ s actions fit many of these criteria
          although there were credible arguments against viewing it has ultra-

     SCT also finds that State Farm’s behavior doesn’t justify the
      award because:

         Unreasonable or jury to consider out-of-state conduct or conduct
          that was dissimilar to the conduct at issue at trial (although SCT
          notes not all conduct has to be identical to be part of a pattern of
          outrageous behavior)
                  State Farm - Gore Guideposts 2 & 3

 Regarding the 2nd BMW guidepost – does the SCT impose a “bright
  line” rule on the ratio between punitive and compensatory damages?

        When is this Court likely to see deviation from single digit multipliers as

        Is D’s wealth a legitimate consideration?

 What is the relevance of the 3rd guidepost – other fines/penalties?
               Philip Morris & Co. v. Williams (2007)

 P’s husband died of lung cancer after smoking. P sued D for fraud claiming
  that D had known for 40 years that cigarettes caused cancer but concealed
  information from the public and/or lied about it (decedent relied on those lies
  to continue smoking). Jury awarded $525,000 in compensatories (after
  remittance) and $79.5 million in punitives.
 Oregon SCT upheld award after applying Gore’s 3 guideposts. D challenged
  the trial court’s jury instructions

 P’s attorney told jury to “think about how many other Jesse Williams in the
  last 40 years in the State of Oregon there have been….”
     Jury instruction: “Punitive damages are awarded against a D to punish
      misconduct and to deter misconduct ” and “ are not intended to
      compensate P or anyone else for damages caused by the D’s conduct.”

     State court rejected D’s request for a different instruction telling jury they
      could consider harm suffered by others in determining relationship of D’s
      conduct to P’s harm BUT that it could not punish D for the impact of its
      alleged misconduct on other persons who may bring lawsuits of their own
Philip Morris Co v. Williams – the Supreme Court

   SCT reversed the award of punitive damages because:
     Jury instruction used by lower court does not effectively guide jury
      discretion and allows juries to punish a D for injury that it inflicts upon
      non-parties who are strangers to the litigation.

   Is this a procedural due process (lack of adequate
     safeguards) issue or a substantive due process (direct
     review of excessiveness) issue?

   After Williams, can juries still take into account the harm
     to other people D has caused in determining the
     reprehensibility of D’s conduct (Gore guidepost #1)?

       What must lower courts do to ensure that juries seek “simply
        to determine reprehensibility ” but not “punish for harm
        caused strangers?”

             Punitive Damages For Breach of Contract

 General Rule: No punitive damages for breach of contract unless there is an
  independent tort in the contract setting that can be the basis of the punitive
  damages award.

 WHY?
     Tradition – forms of action are separate
     Hostility to punitive damages – don’t want to extend beyond torts
     Deterrent effect on entering contracts could be too significant
 Independent Torts (Possibly) Supporting Punitive Damages
             In Breach of Contract Situations

 Fraud
   Examples – Formosa, Haslip, State Farm, BMW v. Gore

 Conversion (theft)
   Haslip (alternative theory)

 Bad-Faith Breach (insurance only?)
   State Farm – excellent example

 Tortious Interference with contract/business relations
   Courts usually require that D’s breach of contract w/ P have the purpose of
    interfering w/ P’s other relationships – NOT enough that D knew could hurt other

 Gross Negligence (?)
   Usually not a basis for punitives in breach of contract UNLESS there is some physical
    harm to person or property other than that under the contract
   Ordinary negligence is never the basis for punitives (contract or not)
                   Formosa Plastics v. Presidio Engineers

   Formosa invited Presidio to bid on a construction project for concrete foundations. Sent
    a bid package w/ representations about Formosa’s & Presidio’s obligations re (1)
    scheduling, ordering & delivery of material, (2) work schedule, (3) beginning/end dates.
       Presidio relied on these representations to enter a bid, which was accepted.
       Job was substantially delayed, ended up costing far more than estimated.
       Presidio discovered that Formosa intentionally lied about the bid package & ran a scheme to
        induce contractors to make low bids & then stay in the game even after the Formosa
        breached its obligations
       Jury found fraud and awarded punitive damages. Texas SCT upheld despite Formosa’s
        argument that this was merely breach of K. Fraud was an independent tort.

   Doesn’t most of the damage come from breach of contract? What is it about
    fraudulent inducement that makes us so willing to award punitives?

   What if it wasn’t clear that the scheme was hatched before the contract was
    entered? What if D intentionally began scheduling deliveries or multiple
    workmen after the project began? Is that fraud or just intentional breach? Is
    timing everything on these sorts of claims for punitive damages?

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